SHOP Marketplace Offers Small Business Owners a Simplified Way to Purchase Group Health Insurance
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The Affordable Care Act mandate that requires businesses with 50 or more full-time equivalent employees to provide employee health insurance benefits has been waived for one year.

Beginning in 2015, employers who fall into this category will face penalties for not offering employee coverage that provides the required “minimum essential health benefits”.

Penalties will also be assessed if the coverage offered does not meet the definition of “affordable”.

In order to comply with the affordability rule, an employee’s portion of his health insurance premium cannot exceed 9.5% of his annual household income.

Beginning in 2014, businesses with 50 full-time equivalent employees or less are exempt from the mandate to provide coverage, and will not face any monetary penalties for not providing an employer-sponsored group health insurance plan.

The penalties for not offering coverage, however, may come in the form of reduced employee morale and it may become more difficult to recruit and retain quality employees in the future.

Healthy employees often make more productive employees.

Small business owners interested in providing health insurance and/or dental insurance for their employees may find it beneficial to take advantage of the Small Business Health Options Program (SHOP) that is part of the new Health Insurance Marketplace. In 2014, SHOP will be open to small businesses that have 50 full-time equivalent employees or less.

In 2016, businesses with up to 100 full-time equivalent employees will be able to participate in the program.

Not all small businesses will be permitted to use the SHOP marketplace to purchase group health insurance. There are specific guidelines that must be met.

The business must have a zip code in the state in which SHOP is offered.

The business must offer health insurance coverage to all eligible full-time employees. This usually applies to employees working at least 30 hours per week, but this number could vary from state to state.

The employer must contribute a minimum of 50% toward the employees’ health insurance premiums.

75% of employees must participate in the group health insurance plan. If this minimum participation requirement is not met, then an employer will not be eligible to purchase a group plan through the on-line marketplace.

All medical plans offered through the SHOP marketplace will be Qualified Health Plans that include the minimum essential health benefits as defined by the Affordable Care Act. Eligible employers will be able to access the online marketplace to compare health insurance and dental insurance options based on price, coverage and quality of plans.

Once the review process has been completed, interested employers will then need to establish a per employee budget based on the 50% contribution requirement. They will also need to make the decision whether or not they will offer dependent coverage. After reviewing all available plan options that fit within the employer’s budget, a “reference plan” needs to be selected. A “reference plan” serves as the baseline for employee coverage and monthly premium costs.

In order to provide greater plan flexibility and help control costs, employers can offer their employees one of the following options to purchase their health insurance:

Broad Choice: Employees will have the option to choose from any plan that is offered by a variety of health insurance carriers.

Metal Tier: Plans are now categorized as Bronze, Silver, Gold and Platinum. The lower the metal level, the higher the out-of-pocket costs and the lower the premium will be. The higher the metal level, the higher the premium and the lower the out-of-pocket costs will be. Employers can choose one specific metal tier to offer and then employees can choose any plan from any carrier within the chosen tier.

Carrier Choice: With this option, the employer can select one carrier and eligible employees can then select any plan offered by that carrier.

Single Plan: Employer will choose one health insurance carrier and one plan option only for employees.

Once a “reference plan” has been established and a plan choice option has been finalized, eligible employees can then select a plan and begin the on-line enrollment process.

Not only will small business owners find the shopping process for health insurance to be more efficient and streamlined by using the online marketplace, but in some cases, favorable tax advantages from using SHOP may result.

Beginning in 2014, businesses with fewer than 25 full-time equivalent employees that purchase employee coverage from the SHOP marketplace may be eligible for tax credits to help cover the costs of premiums.

The tax credit will cover up to 50% of the employer’s premium costs for a taxable organization and up to 35% for a tax exempt organization.

The small business tax credit will be available in 2014 and 2015. In order to receive the tax credit, the employer must purchase a group health insurance plan from the SHOP marketplace. In addition, the employer must also:

Provide health insurance to all employees

Pay at least 50% of the employee-only health insurance premiums

Pay average annual wages of less than $50,000

Eligible employers must claim the credit on their annual tax return. Some additional rules may apply. To better determine if your business qualifies for a tax credit, refer to www.irs.gov and/or consult with your tax advisor.

Unlike individual consumers who will be required to purchase a Qualified Health Plan during a pre-determined open enrollment period throughout the year, small business owners and their employees can enroll during any month beginning in 2014.

As a small business owner, there are certainly many factors to take into consideration when making the decision whether or not to offer group health insurance to your employees.

If you’re looking for a streamlined way to explore the group health insurance options that are available to you, and you’re interested in taking advantage of possible financial incentives, SHOP may be just the solution you are looking for.